Strategy: How to Develop, Structure and Shape a Winning System

Hi, welcome, and yes, I realize the title of this is a bit heavy-handed. While it would be inaccurate and egotistical of me to claim this is any sort of authoritative piece on strategy (if such a thing can even be written), my goal here is to pull together a comprehensive, actionable view of strategy, its structure and how you can develop effective, flexible strategies for yourself and your work. I also want to recognize upfront that this post owes a lot of intellectual debt to many other great strategists, past and present, including but not limited to Jeff Bezos, Elon Musk, Marc Benioff, Noah Brier, Colin Nagy, Mark Pollard, Martin Weigel, Sarah Tavel, Bridget Angear, Faris Yakob, Scott Galloway, and others. After all, strategy itself is a continuous act of synthesis.

For easier navigation or if you’d like to jump ahead, here’s how this essay is structured:

[UPDATE: in the original version of this post (and because strategy can get a bit dry), I included a prelude about the strategy Russell Simmons and Rick Rubin employed to jumpstart Def Jam Records and launch hip-hop music around the world. Due to the recent series of public allegations against Mr. Simmons accusing him of sexual misconduct, that introduction no longer feels appropriate and has been removed. If you’d still like to read it, you can find it archived here.]

The Origins of Strategy

Defining Strategy

For a term so commonly used in both business and everyday life, there’s still a lot of confusion about what strategy actually is and means. Before we get into how to create an effective strategy, let’s start with the basic definition:

The Oxford English Dictionary tells us strategy consists of:

1. A plan of action – Strategies are forward-looking and define a set of steps to be done and rules to follow while doing them. Strategy is an opinion or a hypothesis about the right direction to go and how to proceed down a path.

2. A long-term or overall aim – Strategies must have — and achieve — objectives and outcomes. If you think of a strategy like the plot of a story, the story needs to have a clear, measurable conclusion. In fact, I tend to like storytelling as an analogy for strategy, because strategy should also be segmented into components and milestones, similar to chapters in a book and narrative arcs across chapters.

At its foundations, strategy is operating logic that can be used to achieve goals and solve problems. Just like how Simmons and Rubin designed a path around the major labels to take Def Jam’s music direct to consumers.

As Vince Law, former Product Management lead at General Assembly outlines, “Strategy… bridges the gap between what you aspire to be and what you are doing.”

Naturally, strategy is also hierarchical itself, and can exist across different layers of an organization or initiative.

A simple, illustrative strategy hierarchy

Ultimately, it’s important to view strategy as a pattern of thinking, not a collection of thoughts.

The Early History of Strategy

As a concept, strategy’s historical roots run deep. In ancient times, the first strategy thinkers and writers were primarily concerned with effective military and communication plans — and the two were often closely related. The ancient Asian philosophers Confucius and Chanakya both published early works on communication and propaganda strategy between 500 and 300 BC. The canonical “The Art of War,” attributed to Chinese strategist Sun Tzu in 5th Century BC, is one of the most influential military strategy texts in human history.

“If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.” ― Sun Tzu

The modern English word “strategy” itself is derived from the Greek verb strategos, which means “army leader.” In ancient Greece, a stratego’s success was defined by the general or commander’s ability to defeat an enemy through the best mix of creative thinking and effective use of resources. One of the era’s most famous strategic victories of all time is the fabled Trojan horse, where Greek soldiers disguised a giant wooden horse as a gift to the city of Troy, hid inside, and then snuck out and opened the gates to the city in the middle of the night so the Greek army could capture it.

The Evolution of Business Strategy

Strategy and strategic management have been practiced throughout history by business owners and leaders looking to increase profits and capture competitive advantages. Only recently, however, has strategy evolved into a discipline and field of study in its own right.

Frederick W. Taylor, Henry Ford and Scientific Management

In early 20th Century manufacturing, few people were as interested in productivity as Frederick Taylor, a mechanical engineer at a steel corporation in Philadelphia.

Taylor — a perfectionist if there ever was one — started studying how workers on the assembly line could perform their tasks as fast and efficiently as possible. Taylor analyzed and timed the workers, then used his findings to recommend changes and improvements. Work analysis had never been performed as precisely and scientifically before Taylor’s.

One of the first leaders to hire Taylor to understand and implement his manufacturing principles was Henry Ford, founder and CEO of Ford Motor Company. The two worked together for several years.

In 1903, when Ford first started manufacturing it’s Model T cars, it took the company twelve hours to build one car. By 1914, Ford had reduced the time to complete a car down to 93 minutes using Taylor’s scientific method and other manufacturing innovations Ford himself developed. Ford quickly won over half of the entire U.S. automobile market, using his manufacturing advantages to produce cars faster and cheaper than competitors.

An early Ford assembly line

Taylor’s The Principles of Scientific Management, published in 1911, details his approach and argues businesses can be much more efficient when management decisions are made based on scientific investigation. Taylor’s ideas were tremendously influential, and became the foundation for many modern business concepts like strategic management and business process improvement.

Harvard Starts Teaching Strategy Lessons

Business academics at Harvard also took note of Taylor and Ford’s work, and in 1912 introduced the first management class focused on how business leaders could improve the success of their organization. Harvard referred to this early form strategic management as “business policy,” which taught leaders how to identify the best solutions to solve problems at their company.

Fifty years later, in 1962, Harvard professor Alfred Chandler published Strategy and Structure: Chapters in the History of the Industrial Enterprise, considered the first modern book on business strategy.

Chandler’s work established strategy as a core part of the Harvard Business School (HBS) management curriculum, a tradition that’s been carried on by additional professors like Michael D. Watkins.

“Mission is about what will be achieved,” writes Watkins, “the value network is about with whom value will be created and captured; strategy is about how resources should be allocated to accomplish the mission in the context of the value network; and vision and incentives is about why people in the organization should feel motivated to perform at a high level”

Boston Consulting Group and Strategic Consulting

Boston Consulting Group (BCG) was one of the first firms to introduce strategy consulting in the 1960’s, led by founder Bruce D. Henderson.

“[Bruce] asked what we thought [BCG’s] specialty should be,” recounts early BCG employee Robert Mainer. “Many suggestions were offered, but in each case we were able to identify several other firms that already had strong credentials in that particular area. The discussion began to stall. Then Bruce asked a momentous question: ‘What about business strategy?’ I objected: ‘That’s too vague. Most executives won’t know what we’re talking about.’ Bruce replied, ‘That’s the beauty of it. We’ll define it.'”

BCG billed only $500 in its first month, but its strategy offering quickly got traction.

After close to twenty years leading BCG, Henderson left to write his book The Origin of Strategy. In it, Henderson compares competition in business to Darwinian evolution. “Business and biological competition would follow the same pattern of gradual evolutionary change except for one thing,” says Henderson. “Strategy is a deliberate search for a plan of action that will develop a business’s competitive advantage and compound it.”

Planning: A Framework for Advertising and Brand Strategy

Around the same time BCG (and, subsequently, McKinsey) introduced strategic consulting, a small group of forward-thinking advertising agencies started developing their own strategy discipline: account planning. As detailed in agency JWT’s Planning Guide (1974), account planning was a research-driven, continuous and systematic way to account for all the factor’s that determine a brand’s success, and structure a strategy around it.

Notably, JWT’s framework also identifies that strategy is cyclical. Research helps inform the strategy, and once the strategy’s executed the results can be used to refine the next round of planning (strategy development).

If you haven’t already read everything he’s written on account planning and strategy, I highly recommend going through Mark Pollard’s site as a thorough primer on agency planning. Several of Julian Cole (from BBDO)’s slide decks are also terrific.

Scenario Planning

While agency account planners in the 1970’s focused on communications and consumer complexity, other business strategists were hard at work designing new models to help their organizations better respond to economic complexity. At Royal Dutch Shell’s London headquarters, Pierre Wack devised a method of predictive planning that was so effective Wack and his team successfully anticipated two separate Middle Eastern oil crises in the same decade.

Example: HBS/McKinsey Strategic Planning Framework

In “The Art of the Long View,” author Peter Schwartz details the critical role scenario planning plays in strategy:

“[Strategic plans are] stories that can help us recognise and adapt to changing aspects of our present environment. They form a method for articulating the different pathways that might exist for you tomorrow, and finding your appropriate movements down each of those possible paths.”

Porter’s Five Forces

Carrying the tradition of influential military strategists like Carl von Clausewitz into the business world, theorist Michael Porter saw strategy as a dynamic, competitive ecosystem. Drawing on experiences as an army officer and college athlete, Porter published his “Five Forces” model in Harvard Business Review in 1979, an early and influential competitive strategy framework.

Porter’s model theorizes that business strategy should account for five competitive factors:

2.Threat of substitutes. Competition can also come from a different product or technology. For example, using Uber or Lyft (or riding a bicycle) could be a substitute for buying and owning a car.

3. Bargaining power of customers. In a highly competitive market, if customers have lots of choices, they can introduce price pressure.

4.Bargaining power of suppliers. Suppliers may also hold volume and/or pricing power that changes competitive dynamics. Apple’s ongoing dispute with chip supplier Qualcomm is a recent example.

5.Industry rivalry. Industry rivalry is Porter’s fifth factor used to account for competitive factors like business model, advertising spend, R&D and other elements that influence the competitiveness of a given industry.

Strategy, Porter says, should take all five factors into account with the goal of maximizing a company’s competitive standing, growth and profitability.

More recently, scholars have also proposed a sixth factor to add to Porter’s model: partnerships and cross-company collaboration.

Important Strategy Books Throughout History: A Timeline

Some of the most influential strategy works from 500 BC to present

The Building Blocks of Strategy (and How to Use Them)

If we revisit our earlier definition of strategy — a plan of action to achieve a long-term goal — we can break it down further into the atomic elements or building blocks of strategy. Although there’s no universal consensus on what these components are, whether you asked a McKinsey consultant or a planner at Wieden + Kennedy I’m confident they’d be fairly amenable to using some variation of these:

Problem – What problem are we trying to solve? Why do we need this strategy in the first place?

Insight(s) – Ideas and insights are the raw materials of strategy creation. What unique insights or perspective were used to create the strategy? Why are we confident the strategy’s going to be effective?

Structure – What is our strategy’s statement and structure? What’s the organizing logic for it?

Plan – What’s our plan to accomplish this strategy? What resources are needed to carry that plan out?

Actions – What are the individual actions and executions that will accomplish our strategy?

Results & Learnings – How well is our strategy working? And what can we learn from our results so far to improve our current strategy or inspire our next one?

Again, your mileage may vary depending on the strategist you speak to or the type of strategy you’re looking to create, but this is the general scaffolding of a strategy. And, as I’ve said before, we want to approach strategy development as an iterative, closed-loop system.

Strategy as a Closed-Loop System

Problem

Ironically, I’ve always found that one of the most difficult aspects of problem-solving is knowing the right problem to solve in the first place. Strategies commonly fail when their north star is fundamentally off the mark from the very start.

One approach that I’ve found helpful — particularly when it’s done as a team or group-exercise — is to fill out a logic tree to uncover the “Why” of your problem.

The exercise itself is fairly straightforward.

First, a group leader should state the group’s best understanding of the problem. (Example: “We need a go-to-market strategy to launch our new product, but we don’t know how to position it to potential customers.”)

Next, go through a chain of asking “Why” the problem exists, and what the drivers, causes or important open questions are. Then ask why again for each of those inputs, repeating the process until there are at least three levels of questions. Each member of the team should think about the problem independently and write down their answers.

Good things come from asking “why” a lot

Then, come together as a group and discuss. The goal should be to understand the root, underlying causes of the problem, the fundamental truths that underly them, and to check those against the problem itself to make sure it’s the right one.

Draw out or use post-it notes to create an aggregate, team-version of the problem tree, then assign someone to document it as the formal, team-approved problem statement. Strategic goals and KPIs should also be set up front during this stage to indicate the objectives and milestones the strategy needs to chart a course toward.

Here are some resources you may find helpful for problem-solving and problem clarity:

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Insights

The best strategies are built on top of great insights. Generally, I’d consider a strategic insight to be an understanding of “the true nature of something” (a customer need, market dynamic, or future trend) and/or its relationship to other important environmental factors. There’s also a forecasting component to insights. Strategic insights commonly identify opportunity gaps in time — such as the difference between the current state of something and its anticipated future state.

In the early days of Netflix, founder and CEO Reed Hasting’s central strategic insight was recognizing early on that broadband internet would continue become faster and more widely adopted, then inferring the implications for entertainment consumption. Netflix de-prioritized its larger, more profitable (at the time) DVD-rental-by-mail business to focus on streaming, giving them a first-mover advantage even Amazon has struggled to compete with.

Elon Musk took a similarly early, long-term view of the cost curve for electric car batteries, which inspired Tesla and its early strategy. So did Amazon with server costs, leading to AWS.

There are smart researchers out there who forecast trends and long-term, industry benchmarks. We’re fortunate in that we just need to find them and invest the time to synthesize the right implications.

Insights do have common design patterns, but for the most part quality insights can come from anywhere:

Personal brainstorming

Keyword research

Social listening

Product usage data

Customer reviews and feedback

Conversations with teammates, friends or members of your extended professional network

Quantitative market research

Agencies and consultants

Reading (science fiction can be especially fruitful)

Art and culture

Everyday life

The research phase is another good place in your creative or strategic planning process to take a goal, fact or observation — even one that seems simple or obvious at first — and keep asking “why?” and “what if?” until you push your thinking into new, exciting, and constructive places.

David Wilding, now Director of Planning at Twitter in the UK, has a thoughtful answer to what an insight is (and how to go find them), which is well worth a watch:

Insights must also demonstrate awareness. Strategy does not exist in a vacuum, and it’s important to develop strategy with an understanding of its broader environment and environmental consequences. Patagonia is a great example of a company whose business strategy shows holistic awareness of its broader externalities.

“I know it sounds crazy, but every time I have made a decision that is best for the planet, I have made money. Our customers know that — and they want to be part of that environmental commitment.” – Yvon Chouinard, founder of Patagonia

Looking for some inspiration? Here are a few recommended resources to help you develop your own strategic insights:

Finally, make space for creativity and reflection in your personal life. Get enough sleep, eat well, exercise, and take walks. I personally find a lot of my best ideas come to me when I’m biking or walking.

Structure

Structure is what starts to bind strategy into an operating system. It guides the communication and implementation of a strategy to make it available and understandable to everyone involved in its development and execution.

My recommendation is to begin this process with a short, 2-3 sentence strategy statement (and maybe a few sketches), then extend to a more robust structure like the business model canvas or a strategic brief response. You can get access to a copy of a strategic brief here.

A business model canvas.

This brief or canvas will serve as the foundational document for communicating strategy around your organization or encoding it into systems and business or software logic.

Once the foundation’s in place, extend the structure to real operating activity. To me that includes:

Process (and Playbook): Does everyone on the team know what the strategy is and how they’re expected to contribute to achieving it? Is the strategy documented or encoded anywhere? How would we teach the strategy to a new hire? Could our strategy scale 10X? 100X?

Analytics and Data: Do we have the data capture, storage and management infrastructure in place to measure our strategy?

Other Technology: What are the other systems implications of our strategy? Do we have what we need in place to execute it?

To introduce additional team and individual-level strategic alignment and goal-setting, a framework like V2MOM (Vision, Mission, Methods, Obstacles and Metrics) or OKR (Objective <> Key Result) may be helpful. Personally, I’ve used both at different times with my teams and prefer V2MOM because I think it’s better at communicating strategic prioritization, but both have their benefits.

It can also be helpful to think of structure as the process of translating your strategy into the documented answers and decision-making logic for three strategic questions:

1. Where are we today?

2. Where do we want to go?

3. How do we get there?

Plan

Now that you’ve answered “How do we get there?” — it’s time to fill in the details and turn the answer into a plan people and systems can execute against.

The strategy for your startup becomes an operating plan. The strategy for your marketing campaign might become a brand plan (what do we say?), a communications plan (where, when and how do we say it?), a media plan (where, when and how will we advertise it?) and an experience plan (how will our brand and communications be experienced?).

These types of plans commonly take the form of Gantt charts, timelines, play-books, and spreadsheet models, though it’s even better when they’re available to teams in software that’s dynamic, versioned, trackable and real-time.

“In preparing for battle I have always found that plans are useless, but planning is indispensable.”

Actions

At the end of the day, your strategy is manifested through the actions (tactics) you take in pursuit of it.

What’s important is to make sure every action:

Ties back to the strategy

Is executed with the right prioritization

Is visible to the other actors involved in the strategy

Has a clear, accountable owner

Has a clear scope and necessary resources applied to it

Has a deadline or release date and associated production schedule

Has a measurable outcome

Is delivered on spec / on brand / on budget / on time

Is done with passion and purpose

This is, unsurprisingly, perhaps the single most challenging part of the entire strategic process for one simple fact:

This is the point when the strategy is out of the hands of the strategist.

It’s now up to the doers.

An entire litany (or library) could be written about what to do (and what not to do) at this point. I’ve surely given you enough to read already, but will try and come back to revisit best practices at this specific step separately.

And, of course, if you’re looking to manage alignment between strategy and execution at scale, my excellent, former colleagues at Percolate have some helpful software to enable that.

Results & Learnings

Few strategies survive the battlefield without major revisions, making continuous learning, refinement and feedback loops critical elements of any strategy process. At the end of each execution phase — a three month fiscal quarter, for example — you should exit your current strategy cycle with (a) more data, (b) a better understanding of your core business pillars: market, customer, product and brand, and (c) vision, inspiration, and quantitative guidance for how you should approach your next cycle.

As you can see below, my process and building blocks approach has a lot of parallel’s to McKinsey’s. I happen to prefer my variation, but feel free to use whichever feels more useful (or both). The acronym and names of the steps are far less important than the philosophy, flexibility and focus on closing the loop.

Source: McKinsey

Independently, a similar decision-making framework has also come out of the U.S. Air Force, courtesy of military strategist John Boyd: the Observe → Orient → Decide → Act (OODA) loop. Taylor Pearson’s written a very thorough writeup on OODA, which you can read here.

An OODA flow diagram

For a more in-depth and technical look at how to approach closed-loop decision-making, grab a copy of my strategy template.

Concluding Thoughts: Your Path to Becoming a Better Strategist

At the end of the day, what makes strategy so simultaneously challenging and exciting is the fact that it relies on problem-solving that has to account for a constantly changing present and an uncertain future. Not only that, the solution needs to be so well-designed, communicated and carried out that it actually gets done. Today, putting it all together takes levels of information synthesis, creativity, vision and complexity management few people truly possess, one of the reasons why I expect strategists will need to increasingly rely on algorithms and machine learning to help guide their strategic development and decision-making.

But definitely don’t let that discourage you. Strategy is hard, but it’s also incredibly rewarding and beneficial — both personally and professionally. Approach it with optimism, curiosity, humility and a few good mental models, and you can make great strides in a short amount of time.

And really, there’s no better way to learn strategy than by rolling up your sleeves and testing your assumptions and models. Come up with a hypothesis, product or project, create a plan to bring it to life, get moving, and try to learn from the results. Great strategists aren’t built by sitting on the sidelines.

I hope this has been helpful, and if you ever find yourself in need of strategy help, feel free to get in touch. If I overlooked any great strategy resources out there, let me know in the comments.

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